Service industries probably grew in May at the same pace as the prior month, a sign the U.S. is failing to gain momentum as employment slows and the European crisis intensifies, economists said before a report today.
The Institute for Supply Management’s index of non- manufacturing businesses, which covers about 90 percent of the economy, held at 53.5, matching April’s four-month low, according to the median forecast of economists surveyed by Bloomberg News. Readings above 50 signal expansion
Budget cuts aimed at reducing sovereign debt and putting countries like Greece and Spain on a more sustainable fiscal path are bringing Europe to the brink of a recession that is rippling through the global economy. The lack of strength in service industries and cooling manufacturing, which was a pillar of the recovery, mean there’s little to spur U.S. growth.
“The U.S. economy is really not making the grade,” said Jonathan Basile, an economist at Credit Suisse in New York. “The softer tone is going to continue. We’ll see a slower profile for growth in the services sector.”
The Tempe, Arizona-based ISM’s report is due at 10 a.m. in New York. Bloomberg survey estimates ranged from 52 to 55.1. The services survey covers industries that range from utilities and retailing to health care, housing and finance.
The report follows June 1 data that showed factories tempered production and pared inventories in May as the global economy weakened. The ISM manufacturing index fell to 53.5 from a 10-month high in April. At the same time, the orders gauge climbed to 60.1 last month, the highest since April 2011.
Stocks yesterday reversed early losses as the two-month slump in equities dragged the Standard & Poor’s 500 Index to its cheapest price-to-earnings valuation in six months. The S&P 500 ended little changed at 1,278.18 at the close in New York after retreating as much as 0.9 percent.
A cooling labor market may help explain why demand has yet to accelerate. Payrolls climbed by 69,000 in May, less than the most-pessimistic forecast in a Bloomberg survey, after a revised 77,000 gain in April that was smaller than initially estimated, figures showed June 1. The jobless rate rose to 8.2 percent from 8.1 percent.
Faster hiring and wage growth is needed to ensure sustained growth in consumer purchases, which increased 0.3 percent in April after a 0.2 percent rise the prior month.
“The overall economy is still our customers’ main concern,” Bill Simon, the U.S. chief executive officer of Wal- Mart Stores Inc. said during a May 17 earnings call. “In particular, they remain concerned about job security or the availability of jobs, followed by gas and energy prices and rising food costs.”
Car purchases eased in May, company data showed June 1. General Motors Co. (GM:US) and Toyota Motor Corp. led five of the six largest automakers in reporting U.S. sales gains in May that trailed estimates as incentive offers failed to draw enough buyers amid slumping employment growth.
Bloomberg Survey ================================== ISM Non- Manu Index ================================== Date of Release 06/05 Observation Period May ---------------------------------- Median 53.5 Average 53.4 High Forecast 55.1 Low Forecast 52.0 Number of Participants 74 Previous 53.5 ---------------------------------- 4CAST 53.4 ABN Amro 53.5 Action Economics 53.5 Ameriprise Financial 53.5 Banca Aletti 54.0 Bantleon Bank AG 53.0 Barclays 53.0 BBVA 54.0 BMO Capital Markets 53.5 BNP Paribas 54.0 BofA Merrill Lynch 53.0 Briefing.com 52.0 Capital Economics 53.5 Citi 52.5 ClearView Economics 53.2 Comerica Inc 53.0 Commerzbank AG 53.5 Credit Agricole CIB 53.7 Credit Suisse 52.5 Daiwa Securities America 54.0 Danske Bank 53.5 DekaBank 53.0 Desjardins Group 53.0 Deutsche Bank Securities 53.0 Deutsche Postbank AG 54.0 Exane 53.6 Fact & Opinion Economics 54.0 First Trust Advisors 53.7 FTN Financial 53.8 Goldman, Sachs & Co. 53.0 Helaba 53.0 High Frequency Economics 53.5 HSBC Markets 53.5 Hugh Johnson Advisors 55.0 IDEAglobal 54.0 IHS Global Insight 53.0 Informa Global Markets 52.8 ING Financial Markets 53.0 Insight Economics 53.0 Intesa Sanpaulo 54.2 J.P. Morgan Chase 53.0 Janney Montgomery Scott 54.0 Jefferies & Co. 52.0 Landesbank Berlin 53.0 Maria Fiorini Ramirez 53.5 Moody’s Analytics 53.1 National Bank Financial 53.0 Natixis 54.0 Nomura Securities 52.6 Nord/LB 53.0 OSK Group/DMG 53.3 O’Sullivan 52.5 Parthenon Group 52.9 Pierpont Securities 54.5 PNC Bank 55.1 Prestige Economics 52.5 Raymond James 53.4 RBC Capital Markets 53.0 RBS Securities 52.5 Scotiabank 53.5 SMBC Nikko Securities 53.5 Societe Generale 55.0 Sparkasse Suedholstein 52.0 Standard Chartered 53.2 Stone & McCarthy Research 54.5 TD Securities 52.5 UBS 52.0 UniCredit Research 54.0 Union Investment 53.5 University of Maryland 54.0 Wells Fargo & Co. 53.5 WestLB AG 53.8 Westpac Banking Co. 52.5 Wrightson ICAP 54.0 ==================================
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